Get a safe, hold cash, and wait for the buying opportunity.

[c1ue]

Re: Get a safe, hold cash, and wait for the buying opportunity.

FYI, folks, Switzerland today is not the same as Switzerland of yore.

The currency used to be backed much more strongly, but now a significant part of that backing is US$.

Currency/interest rate arbitrage has some benefit for the Franc, but it is not bulletproof by any means.

[quigleydoor]

Re: Municipal bond rip-off reference

A good reference/URL I could read at some point (if I ever get some time) would be good.

David F. Swenson, Unconventional Success: A Fundamental Approach to Personal Investment, Free Press, 2005. Pages 111–118.

[Sapiens]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Ok people, earlier I warned you that the only unknown was what the Fed was going to do; today we got the clear hint from Fed’s William Poole:

http://www.bloomberg.com/apps/news?p...YMM&refer=home

Aug. 16 (Bloomberg) -- William Poole, president of the St. Louis Federal Reserve Bank, said the subprime mortgage rout doesn't threaten U.S. economic growth, and only a ``calamity'' would justify an interest-rate cut now.

This tells me in my opinion, the Fed has chosen to keep the Fed Funds rate at 5.25% while letting it drift below that for a bit to bail out many in$iders.

http://www.safehaven.com/article-8196.htm

August 16, 2007

Well, Bless Poole's Beautiful Hide!
by Adrian Ash


ONLY A "CALAMITY" would justify an interest-rate cut now, says St. Louis Federal Reserve chief William Poole.

In which case, he either liquidated his personal stock investments before June...or the guy's got some real hide.

Fed Funds Target vs. Effective Fed Funds


"The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by major brokers," says the New York Fed. And as you can, it's slipped sharply below target...closer to the current yield on 10-year Treasuries, in fact.

So why does the US central bank insist in lending fresh cash to the money markets through its open-market operations? The Fed's put in $76 billion over the last week, ostensibly to keep the Fed funds rate on target by making money more readily available.

Some $24 billion of that liquidity is still outstanding right now (as of 10:45 EST, Thurs 16 Aug.), with the latest $5 billion being auctioned for a repurchase agreement just ahead of today's open.

Does that make it a calamity yet?





Adrian Ash
BullionVault.com

I hope you appreciate the warning.

My best to you and yours,

-Sapiens

[Spartacus]

Re: Get a safe, hold cash, and wait for the buying opportunity.

EDIT >>> Oh, I see ... at first I thought the free market is lending at 4.75 while the FED keeps lending at 5.25, but actually the FED has actually lowered the rate without announcing it?
<<<

How is that chart possible?

With the mass of computers hooked up to arbitrage away 1/10 of 1 percent differences, How is that interest rate differential possible ?

Or am I not understanding the chart?

Ok people, earlier I warned you that the only unknown was what the Fed was going to do; today we got the clear hint from Fed’s William Poole:

http://www.bloomberg.com/apps/news?p...YMM&refer=home

This tells me in my opinion, the Fed has chosen to keep the Fed Funds rate at 5.25% while letting it drift below that for a bit to bail out many in$iders.
I hope you appreciate the warning.

My best to you and yours,

-Sapiens

[lobodelmar]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Ok, folks, suggestions appreciated.

I have been meaning to consolidate all of my 401k and 403b plans (i have 5 from 5 different employers, 100% invested in equities---figured retirement so far off, I took the highest risk hoping it will pay off over time). I am changing to a new job next week, so this is a good time to roll things into one. Or I can leave everything where it is...

If I stick with my current plans, figure I'd pull the money into cash for the time being. But that doesn't appear to be an option in any of the plans.

So that leaves me bonds, stocks or money market funds. The MMF are all backed primarily by financial orgs with MBS, so I can't count on the NAV to stay at $1. I am pretty sure the stock funds I am currently in will take a nice hit. (They already have this month...)

Doesn't appear that I can pull money out and into cash. They don't give you that option in any of my plans. Question is will I be able to pull all the funds out and into a rollover IRA with a better investment vehicle before the market really hits their value...

My new employer doesn't have a 401k, so I am on my own at this point. They have a SEP-IRA...can't pool older funds into it.

Would you scramble now and get all your funds into a Rollover and let it sit in cash, or leave it until October in the 5 separate stock mutual funds?

Disclaimer: I don't expect this to be actionable investment advice. Just curious what others would do in my situation. Had no idea retirement accounts were so restrictive...but like many people, I rarely even look at them.

[c1ue]

Re: Get a safe, hold cash, and wait for the buying opportunity.

I think the money market funds - have risk but it is probably not yet going to be that bad.

Don't forget that any downward play pricing action is not going to occur until the actual defaults play through.

I don't see MMF's selling MBS' daily, more like buying them as part of the portfolio for cash generation. Unless your MMF is paying 8%...

I have seen major deterioration in a number of MMFs in various places - one of my indicators to get out of a specific bank.

Netbank lured me in with a 4.5% rate 2 years ago, then it dropped to under 3% at which time I ran... good thing!

However, from a flexibility perspective you should absolutely roll everything over into whichever account gives you full flexibility in stock/bond buys/sells.

Whichever specific designation doesn't matter.

I had rolled all of my accounts except for Fidelity and my childhood IRA into my previous employment's 401K - only because that one gave me a Schwab Personal Choice stock account.

The IRA wasn't rolled because I just dumped my major holding - Amazon - unfortunately before the earnings report but still a nice profit, but it is headed to Schwab too.

As for what I have been doing - I was sitting on 100% cash except for a 100 share placeholder Yahoo position for over a year, excepting 4 forays into free Google money land.

Today I finally succumbed to Lukester and bought GLD - first at $65 then averaged down with a $63.82. Damn I missed the $63.50 by about 1 minute.

So my Schwab 401K is now 70% GLD, with the remainder Yahoo and mostly cash.

To be clear, GLD is a trading position not a core holding.

[lobodelmar]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Well, I ultimately decided I did not want to watch my entire portfolio shrink if the market does go through significant turmoil...but since I don't know enough to understand how things are going to turn out (read: fed discount rate cut shoring up NYSE today big time...) I compromised, and took action on the half of my retirement funds that are easy to manipulate.

I took them out of the stock fund that had dropped from 17.15 a share two months ago to 15.80 a share in the past two weeks and plopped it all into the lowest risk government securities fund that was available. In my 4 other plans, I am leaving my position in equities for now, and will roll everything into one very flexible plan when I complete my shift to my new job. Figure it is finally time to meet with a financial planner.

[rabot10]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Sapiens -

(" Back to basics my boy, back to basics ") ???

If you say so Sapiens. The Oracle has spoken.

Hey Lukester needs some iTulip credits I think becous he makes no sense

[rabot10]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Hey Lukester needs some iTulip credits I think becous he makes no sense

But I love the guy (i think hes a guy)

[c1ue]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Figure it is finally time to meet with a financial planner.

SeaWolf,

What are you expecting from the financial planner?

They mostly just say - diversify diversify diversify. This just means you get smacked if there is a full asset market turmoil like we've just seen.

It is also very rare you meet one that knows anything about inflation protection.

Most FPs are CPA's with an additional certification - this isn't bad but I just want to point out that there is a huge difference between ameliorating a tax bill and growing ahead of an inflation curve.

[Guest]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Spot on C1ue.

[friendly_jacek]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Sapiens, could you tell us when that buying opportunity might happen? Should that correspond to maximum bearishness in the markets?

[c1ue]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Today I finally succumbed to Lukester and bought GLD - first at $65 then averaged down with a $63.82. Damn I missed the $63.50 by about 1 minute.

So my Schwab 401K is now 70% GLD, with the remainder Yahoo and mostly cash.

To be clear, GLD is a trading position not a core holding.

Putting in stop at $67.2, looking to see if GLD can get past the $68.

[c1ue]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Putting in stop at $67.2, looking to see if GLD can get past the $68.

Moving stop to $68.2. Looking to see if the gold bugs are right: a breakout past $700 will ride to $730 or even $750.

[Finster]

Re: Get a safe, hold cash, and wait for the buying opportunity.

Get a safe, hold cash, and wait for the buying opportunity.

OK people, many are asking what’s in store for the following week: August 13, 2007 to August 17, 2007.

There will be lots of turbulence and volatile action in the markets, the only unknown here is what the Fed chooses to do, all else is clear: Deflation.

If you are smart, you have cashed all your equities and real properties and are holding physical cash waiting for the buying opportunity. If not, you will get burned. (If you hold large amounts of cash, you better be using some type of secure warehousing like Brink’s for your peace of mind.)


If you are lucky, the Fed will choose to keep injecting liquidity for the next week, but I doubt they will keep going much longer than that. In my opinion this weekend was used to choose who will be allowed to fail, and let me tell you, it will not be pretty. The majority of people’s retirements funds will be technically wiped out. So if you have not cashed out, this are the last moments you have to do so.

Once you have cashed out, be patient! Soon you will be able to gorge on many assets that were only a gleam in you eye.

Life is good people, and here you will have the buying opportunity of a lifetime!

Cheers and my best to you,

-Sapiens

DISCLAIMER:

Not bad advice at all, Sapiens. Just make sure some of that physical cash is the hard, shiny, kind.